While iRobot is not a mature company centered on earnings growth, nor a growth company focused on rapid revenue growth, it still has its place in investors' portfolios.

When looking to purchase a stock for the long haul, 90% of the time I'm looking to do so based on its fundamentals. While iRobot(NASDAQ:IRBT) doesn't have the most compelling valuation story, it does have other compelling components that led to my long position in the stock.

Generally, I'm searching for one of two things in my investment thesis: A dependable company that is consistently growing earnings per share and its dividend payout, or a growth company that is significantly increasing revenues and earnings in a secular growth environment with reasonable valuation metrics.

However, iRobot doesn't fit either of these scenarios.

Valuation and past resultsThe stock trades at an expensive 42 times last year's earnings and 25 times next year's earnings. Compare that to the Nasdaq 100, which trades at 20.8 times last year's earnings and 18 times next year's earnings.

Below is a look at the company's last five years' worth of earnings per share and revenues:

Year

EPS ($)

EPS Change ($)

EPS Growth

Revenues in Millions

Rev. Change in Millions

Rev. Growth

2009

0.13

--

--

$298.6

--

--

2010

0.96

0.83

638.46%

$400.1

$101.5

33.99%

2011

1.44

0.48

50.00%

$465.5

$65.4

16.35%

2012

0.61

(0.83)

(57.64)%

$436.3

$(29.2)

(6.27)%

2013

0.94

0.33

54.10%

$487.4

$51.1

11.71%

2014 (est.)

1.08

0.14

14.89%

$565

$77.6

15.92%

Source: MSN Money

The big question from the above data arises when you see how sales and earnings rocketed higher in 2011, before trailing off in 2012. According to the company's conference call for fiscal 2012, iRobot experienced rapidly declining sales from its defense and security business.

This was at a time when the United States was withdrawing troops from Afghanistan. As a result, sales for robotics in the field dropped, not surprisingly.

Turning it aroundToday, the company's sales have rebounded thanks in part to its home consumer sales. Now, I say the forward valuation is slightly expensive at 25 times earnings because iRobot only expects to grow earnings around 15% this year, according to the guidance provided in its recent first-quarter-earnings report.

However, that doesn't make the stock non-investable. For small companies that have plenty of potential, but not the most attractive traditional valuation metrics, there's a different number that I like to look at: market cap.

Often, when one examines any of those fly-by-night momentum stocks, the question is unavoidable: How it will ever grow into its current $10 billion or $20 billion market cap? Look at Twitter, for example.

The company has no earnings, slowing rates of monthly active users, and a $22 billion market cap. With insane valuation metrics and no profit, it's hard to picture the company growing into that market cap -- which has shrunk considerably in the past month -- while maintaining reasonable valuations.

In this case, however, iRobot only has a market cap of $1.01 billion. One can realistically envision this company having a modest market cap of $3 billion-$5 billion within the next five years, without having an egregious valuation. Especially if you believe that the robotics industry and improving technology has plenty more room to grow.

Of course, we can't just "imagine" a company being worth X amount of dollars down the road. But sometimes you need to have some forward-looking vision when choosing your smaller investments. That's the case with iRobot, which also has solid sales and earnings to prevent it from being purely a pipe dream.

It's also worth mentioning that the company has zero long-term debt, which is a positive when scoping out potential investment candidates.

Home robot growth potentialThe company experienced 30% sales growth in 2013 for its home robot division. The new additions of the Roomba 800 Series vacuums and Scooba 450 floor scrubbing robot are helping to increase sales.

According to the 2013 fourth-quarter conference call, home robot sales are also growing robustly in Asia Pacific -- mainly driven by China and Japan -- increasing 40% in 2013.

Management did not specifically state how much growth they expect out of Asia Pacific, only that it expects "strong 2014 growth in each of our three markets," (the other two being North America and Europe), according to CEO Colin Angle. In the most recent earnings report, management left guidance unchanged.

Takeover target?Another avenue worth considering is in merger and acquisitions. iRobot, with a relatively low market cap, is a takeover candidate. While it might not come from Google (NASDAQ:GOOG), the technology giant recently acquired eight robotics companies within a six-month period.

While a $1 billion price tag (and likely more, assuming the acquirer were to pay a premium for iRobot) isn't cheap, it's certainly not out of the question for many big name technology companies -- like Google -- to spend in M&A activity.

The robotic finishTo be honest, the company's dependency on the home robot division is slightly frightening. However, it has recently introduced the new Ava series robots.

While the lineup is still very young, it is designed for the corporate and health care landscapes, where the latter of the two environments could be a huge market for iRobot. For now however, the results are still too new to know how much potential that is exactly.

I am excited to listen to the upcoming conference calls to see what CEO Colin Angle and his team plan to do going forward and what technology they may have on the way.

This is a long-term play on a company that has very impressive technology, with its hands in the defense, consumer, health care, and corporate landscapes. It is not a booming growth company. Instead, it's a young, small market cap company with a solid start in what could likely be a very relevant field in the future.

Author

At The Motley Fool I cover consumer goods and industrial companies, and mainly the automakers. I am a long-term investor looking for companies with sustainable and above average growth. I also like to uncover value, dividend-paying companies. Follow me on Twitter @BretKenwell